Follow the money: The oilpatch and First Nations

We got a taste this week of what financial transparency looks in the resource business — and it’s a taste that some people find mildly bitter.

The Globe and Mail got hold of a document from multinational oil company Royal Dutch Shell entitled “Report on Payments to Governments for the Year 2015”; it’s readily available now on the web.

Part of a global anti-corruption effort meant to force companies to disclose the taxes, royalties, bonuses and other fees they pay to governments around the world, the Shell report details a whopping US$21.8 billion in taxes and fees paid to governments in jurisdictions where Shell operates, primarily places like Malaysia and Nigeria.

For Canadians, what’s most interesting in the report are the payments Shell made to a series of First Nations in Alberta, primarily in the oilsands region where the company is active. The sum of these payments — $7.8 million — may seem small.

But when you consider the fact that half of the total went to a single community of 1,000 members (700 living on reserve) — the Woodland Cree First Nation — the disclosure becomes a lot more interesting.

Shell, which is based in the United Kingdom, made this report under a new U.K. disclosure law, but similar laws will soon force mining and oil companies in the U.S. and Canada to file the same kind of reports.

These laws are part of a global movement that began in the 1990s aimed at countering the negative impact of what’s known as the “resource curse” — where countries wealthy in natural resources see tax and royalty money disappear into the Swiss bank accounts of corrupt leaders rather than trickle down to a population in need. Angola and Equatorial Guinea, with their fabulous oil wealth and impoverished populations, were seen as cases in point.

The idea of the Extractive Industries Transparency Initiative (EITI) was to get governments to report on their receipts and to force companies to disclose what they pay. Canada, which has a huge mining sector, has passed a law mandating disclosure of payments by Canadian companies both at home and abroad; the first annual reports under that law are expected next May.

Claire Woodside is director of Publish What You Pay Canada, part of the global movement pushing for this kind of transparency. She says that the focus has been on the resource sector because natural resources are owned by the people, are finite and are not mobile, unlike manufacturing or high tech industries. “They can’t move from one country to another.”

Ottawa needs to know who needs its help — and who doesn’t. It needs to help out an impoverished, isolated reserve in northern Manitoba rather than a prosperous community with millions of dollars in resource revenues.

What’s particularly interesting about the Shell report is that the company has interpreted First Nations as holding the status of governments under the U.K. law — a view that may not be shared by other multinationals. But once a big company like Shell takes that approach, it’s likely to be emulated by others.

The Canadian law, passed by the Harper government, is explicit in saying that it applies to payments to aboriginal governments as well — but Ottawa delayed for two years the requirement to disclose those specific payments to allow time for consultations. As a result, we won’t be seeing any disclosure of payments by Canadian companies to aboriginal governments until 2019 at the earliest.

And unfortunately, the Canadian law excludes pipelines — so money paid by TransCanada or Enbridge to governments, including aboriginal ones, won’t be disclosed.

Many leaders of First Nations object to any disclosure of resource payments, claiming that they result from “private, commercial agreements that contain sensitive, confidential information.”

But First Nations are also elected governments — which means they share with other levels of government a duty of disclosure to their members and the wider community. “They’re no different from any other governments,” says Woodside.

First Nations leaders have argued that this data should be disclosed — but only to their own members. Woodside says that’s not good enough. “Measures for open data do not delimit the user community because that’s not transparency.”

Craig Makinaw, the Alberta regional chief of the Assembly of First Nations, told Shawn McCarthy of The Globe and Mail that many bands receiving these private sector funds fear they will be “penalized” by Ottawa through funding clawbacks if the information is made public.

Which is exactly the point. If Ottawa is to prioritize its spending on areas where the need is greatest, it needs to know who needs its help — and who doesn’t. It needs to help out an impoverished, isolated reserve in northern Manitoba rather than a prosperous community with millions of dollars in resource revenues. Otherwise, taxpayers’ money is being used to help the rich get richer. Surely that’s not the goal of the AFN.

Of course, the leaders of aboriginal governments squawked against the Harper government’s efforts to force them to disclose their own financial statements under the First Nations Financial Transparency Act. They claimed the law threatened their sovereignty. In fact, all it did was expose a few aboriginal communities — some very poor — where leaders were paying themselves large salaries.

In one of her first actions after being sworn in as minister of Indigenous and Northern Affairs last fall, Carolyn Bennett announced that she was going to stop enforcing the compliance measures imposed under the Act and unblock millions of dollars that had been withheld from First Nations that had failed to comply with the law.

That was a mistake. Likewise, it would be an error for Canada to step back from forcing its mining and oil companies to disclose all payments it makes to governments — including aboriginal governments. With companies like Shell leading the way, that now seems unlikely.

The views, opinions and positions expressed by all iPolitics columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of iPolitics.

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Alan Freeman is an Honorary Senior Fellow at the University of Ottawa’s Graduate School of Public and International Affairs. He came to the U of O from the Department of Finance, where he served as assistant deputy minister of consultations and communications. Alan joined the public service in 2008 after a distinguished career in journalism as a parliamentary reporter and business journalist for The Canadian Press, The Wall Street Journal and The Globe and Mail. At the Globe, he spent more than 10 years as a foreign correspondent based in Berlin, London and Washington.